An Amendment to Pennsylvania Rule of Professional Conduct 1.4 (Communication) takes effect on July 1, 2006. The amendment requires a lawyer in private practice to inform a new client in writing if the lawyer does not have professional liability insurance of at least $100,000 per occurrence and $300,000 in aggregate per year, subject to commercially reasonable deductibles, retention or co-insurance. The amendment also requires a lawyer to inform existing clients in writing at any time the lawyer’s professional liability insurance drops below either of those amounts or if the lawyer’s professional liability insurance is terminated. It further requires the lawyer to maintain a record of these disclosures for six years after the termination of the representation of a client.
Solo & small firm attorneys in Pennsylvania have fought long and hard against mandatory insurance and/or mandatory reporting. Objections include a strong feeling that such an amendment puts lawyers in those environments at a disadvantage compared to those at large firms. There is also a reasonable fear that mandatory insurance will put too much power in the hands of insurers, and for attorneys doing plaintiff work, this is an undesirable outcome.
Nonetheless, the PA Supreme Court ultimately felt that the protection of the public outweighed any possible negative effects on lawyer’s practices. The final Amendment, though, is far less Draconian than some which were proposed along the way.
The comments to the Amendment contain specimen language to be used in the event there is no insurance, that insurance drops below the minimum, or in the event that insurance is terminated.